"Is there merit in these arguments? One way of testing for this formally is to compare diesel prices in India with those prevailing in other countries, adjusted for PPP incomes, as well as relative energy abundance," the Survey noted.
As per the report, countries that export oil or those that are relatively diversified and energy- abundant can afford to keep domestic prices lower.
"The evidence shows that just such a predicted relationship indeed holds. But even accounting for this, diesel prices were already 20 per cent below predicted levels for India in 2010.
"The divergence has since doubled as global oil prices have surged 45 percent (from U.S. $80/barrel Brent prices in 2010 to US.. $120 currently), while domestic price adjustments have not followed," the Survey pointed out.